Bajaj Housing Finance Shares Tumble 6% as IPO Lock-In Period Ends

Written by Shehnaz Shaikh
December 12, 2024

Shares of Bajaj Housing Finance fell by 6% on Thursday, hitting a two-week low of ₹132.80. The decline comes as the three-month IPO lock-in period ended today, releasing 12.5 crore shares, or 2% of the company’s outstanding equity, into the secondary market for sale.

Key Highlights

• Lock-In Period Expiry:
  • The IPO lock-in period concluded, allowing early investors and insiders to offload their shares.
  • This led to a sell-off, triggering a 6% decline in share price.
• Trading Volume Surge:
  • A significant increase in trading volumes was observed.
  • The heavy activity was driven by both institutional and retail participants.
• Impact on Share Price:
  • The stock fell from ₹690 to ₹650 in a single session.
  • The decline highlights temporary market pressure due to the increased supply of shares.
• Investor Sentiment:
  • While short-term sentiment remains cautious, long-term investors see potential buying opportunities.
  • Analysts predict a recovery based on the company’s strong fundamentals.
• Sector Context:
  • Bajaj Housing Finance operates in a competitive financial services sector, where such fluctuations are common during key events like lock-in expiries.

Bajaj Housing Finance: A Brief Overview

Part of the prestigious Bajaj Group, Bajaj Housing Finance operates as a non-deposit-taking housing finance company.

Key Milestones

• Established: 2008
• Registered with NHB: Since 2015
• Promoters:
  • Wholly owned by Bajaj Finance, which is 51.34% owned by Bajaj Finserv.
  • Both entities are classified as promoters.

Q2 FY25 Achievements

1. AUM Milestone
   • Crossed the ₹1 lakh crore mark, reaching ₹1.02 lakh crore compared to ₹81,125 crore in Q2 FY24.
2. Profit Growth
   • Reported Profit After Tax (PAT) of ₹546 crore, up from ₹451 crore in Q2 FY24.
3. Operational Efficiency
   • Reduced Opex to NTI ratio to 20.5% in Q2 FY25, down from 22.1% in Q2 FY24.
   • Maintained a liquidity buffer of ₹3,220 crore with a liquidity coverage ratio of 220.9%, well above the regulatory requirement of 85%.

Market Performance Since IPO

• Strong Listing Performance:
  • Bajaj Housing Finance debuted on the stock exchange with a 12% premium over its issue price.
  • The IPO was oversubscribed by 45 times, reflecting strong investor demand.
• Growth Trajectory:
  • In the first three months post-listing, the stock price surged by 20%, driven by positive market sentiment and strong quarterly results.
  • Analysts consistently highlighted the company’s robust loan book and low NPA levels as key strengths.
• Volatility in Recent Months:
  • Ahead of the lock-in period expiry, the stock saw fluctuations due to speculative trading.
  • Market conditions, including rising interest rates, added to the volatility.
• Impact of Lock-In Period Expiry:
  • The stock dropped 6% as the lock-in period ended, allowing pre-IPO investors to sell their holdings.
  • Increased supply of shares in the market caused temporary downward pressure on the price.
• Long-Term Outlook:
  • Despite short-term corrections, the stock remains a favorite for long-term investors due to its solid fundamentals.
  • Analysts predict recovery based on the company’s steady financial performance and growth in the housing finance sector.

Investor Takeaways

1. IPO Lock-In Expiry Impact
   The expiry of the lock-in period has increased the availability of shares in the market, which, combined with broader market volatility, has contributed to the price drop.
2. Strong Financial Performance
   Bajaj Housing Finance’s robust financials, including significant profit growth and improved operational efficiency, make it a strong contender for long-term investment despite short-term price fluctuations.
3. Prominent Position in the Market
   As part of the Bajaj Group, the company benefits from the conglomerate’s strong brand and market presence, along with synergies from its association with Bajaj Finance and Bajaj Finserv.

FAQs

1. Why did Bajaj Housing Finance shares drop today?

The drop is primarily due to the end of the three-month IPO lock-in period, which released 12.5 crore shares into the secondary market, increasing supply.

2. What was the IPO price of Bajaj Housing Finance?

The IPO was priced at ₹70 per share, and the stock debuted at ₹150, a 114.3% premium.

3. Is Bajaj Housing Finance a good long-term investment?

Despite short-term fluctuations, the company’s strong financial performance, operational efficiency, and association with the Bajaj Group make it a solid long-term investment opportunity.

Final Thoughts

The recent decline in Bajaj Housing Finance’s share price is likely a temporary response to the increased supply from the lock-in expiry. With its strong financials, operational efficiencies, and milestones like crossing ₹1 lakh crore in AUM, the company remains a strong player in the housing finance sector.

Stay tuned to Vista Times for more updates on market trends and investment insights.